IFS looking strong: sells Intercim and TCM to management buyouts

Swedish enterprise software vendor IFS has sold its Intercim manufacturing executions system (MES) and Time Critical Manufacturing (TCM) subsidiaries, both included as part of IFS’ acquisition of US-based EMS in 1999, in two separate management buyouts. Intercim will continue as is, trading under its existing name, while new company WorkWise, formed by the TCM management team, will continue with the TCM enterprise application, its customer base and employees. IFS emphasises that both will also continue as trading partners with IFS wherever it makes sense for their mutual manufacturing clients. No further details have been disclosed. The announcements came as IFS revealed an operating loss of SEK –114m for its third quarter 2001, compared with SEK –158m for the same period last year. Beyond the improved earnings position, cash flow and market share are also better. Net sales increased by 26% to SEK 672m, against Q3 2000, while cash flow improved by SEK 169m to SEK -38m. The company says its action plan to reduce costs, launched late last year, is working. Costs for the whole period since then have been reduced by SEK 253m. Efficiency improved, measured as sales per employee, has increased by 38%, and IFS says “further actions are expected to result in cost reductions of SEK 150m, with a positive effect on earnings for 2002 amounting to SEK 150m.” There is no doubt that IFS is looking very healthy. The firm has been involved in a stream of seriously large contract wins in recent months spanning global aerospace and defence as well as global OEM manufacturers like General Electric and General Dynamics. In the US 18 contracts were signed with new customers, five valued at in excess of SEK 10m, and several were signed at the end of September. In particular, license sales grew by 11% to SEK 254m, compared with SEK 230m for the third quarter of 2000. Net sales for the first nine months were up 45% to SEK 2,305m, compared with SEK 1,589m. The picture for the first nine months shows license revenue up 48% to SEK 935m, compared with SEK 633m for the period in 2000. And the picture is good for consulting revenue also – up by 44% to SEK 1,195m, compared with SEK 827m last year. Nevertheless, although the wind is set fair for the foreseeable future, IFS’ management warns that “the uncertain global situation, however, may affect customers’ inclination to conclude agreements.”